OVER the past six years Syria, once a byword for proto-Soviet state
control and autarky, has opened up its economy and implemented
investment laws that allow foreign companies to set up shop. But few
multinational food companies have wised up to the opportunities within
an emerging market of 18 million consumers. As a result, who has dared,
has won, to mangle the British military motto, allowing some foreign
companies, such as France's Bel Groupe, to command large slices of
the Syrian market.

From 1982 until 2000 Syria adopted a nationalisation policy,
forcing foreign companies to smuggle in goods from neighbouring
companies.

After the death of former President Hafez Al Assad in 2000,
however, the country started a reform drive and moved towards a market
economy under Assad's son, current President Bashar Assad.

A change in investment policy in 2003, Investment Law 10, allowed
the Bel Groupe, which manufactures processed cheese brands Kiri and
Laughing Cow, to enter the Syrian market.

In June 2005, the company invested Euro 13 million, the largest
single foreign investment in Syria's non-retail sector in the past
three years, to set up a 30,000 square meter factory outside of
Damascus.

The move was unusual for the Bel Groupe, said Karim Saidah, General
Manager of Bel in Syria, as for the past 40 years the company had
converted old factories and used second-hand machines from other global
operations when establishing a presence in new markets. However, Syrian
law required the importation of new machines, taking an 85% slice of the
total investment.

Due to surging demand and savvy marketing the investment soon paid
off. "We went from 5% market share to 65% in less than 18 months.
It is a success story, as we are producing more than planned," said
Saidah.

As a result, local companies' slice of the 150,000 tonnes a
year cheese market has declined, said Saidah, to between 6-7% of the
processed cheese market. Some 7,000 tonnes of this is processed cheese,
valued at Euro 35 million-a-year.

To ease its way, Bel used the Joud Company, a major Syrian
conglomerate that implemented a modern distribution system six years ago
for Proctor & Gamble and Pepsi, allowing Bel to reach 10,000 retail
outlets.

Having a presence in Syria also allowed the company to meet strong
local demand. And demand for products is rising across the board,
particularly for Western brands, attributed to a rise in access to
satellite television and the Syrian army's withdrawal from Lebanon
in 2005.

Beirut used to be a major shopping destination for wealthier
Syrians, who are now looking to Damascus for imported products.

The construction of several shopping malls in the country is also
underway, including one valued at US$500 million, which is expected to
create greater demand in the retail and food sectors. The French
supermarket chain Carrefour is also rumoured to be interested in one of
the mall schemes.

However, multinationals have not appeared to sense the shift in
Syria's economy due to the political and social turmoil with
neighbouring Lebanon and Iraq, and perceived instability in Syria
itself.

"I told French investors recently that now is the time to come
to Syria, but I have not heard any plans in the food sector or any other
areas, other than the tourism or real estate sectors," said Saidah.

"Marketing is very cheap in Syria, so I have been encouraging
multinationals to invest, as what will increase over time is advertising
costs," he added. Indeed, government statistics suggest that
Syria's advertising sector grew 50% in the last year.

And there could be more opportunities to come: three weeks ago
Syria introduced a new investment law--which includes exporting profits
overseas--to attract foreign investors to help boost the country's
sluggish economy and lower unemployment, which is estimated at 20%.

But other than Gulf investors, there appears to have been minimal
interest.

"The Gulf countries are looking to diversify. Otherwise, there
is not much [Western] foreign investment or forward looking investors,
but the Chinese and others are," said Roddy Drummond, deputy head
of the British Embassy in Damascus.

The perceived risk of investing in Syria can pay off however, as
the Bel Groupe exemplifies, with 40% growth in the cheese market over
the last two years and a slated 15-20% growth over the next five years.

"Risk takers are the winners, that is why we are a success
story," said Saidah.

Indeed, since Pepsi was taken off a Syrian black list in 2005 and
the Joud Company started distributing Pepsi products, Joud has cornered
50% of the country's US$100 million soft drinks market. Car
manufacturers have also benefited from changes in import regulations,
with annual growth in the sector estimated at 50%.

The presence of foreign companies is also having a positive effect
on Syria through bringing about regulatory changes. Saidah said the
company faced a 37% importation tax on cheddar cheese, but after meeting
with government officials managed to get the tax lowered to 7%. In
return, the Syrian government used Bel as a poster boy to be held up as
a well-known brand that has benefited from its involvement in Syria.
"It is a win-win situation," said Saideh.

BY PAUL COCHRANE, in Damascus

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